In positive Bay Area market news, newly minted shares of Tesla closed the day up 40.5% on their first day of trading
This irks me to no end. the purposeful underpricing of Tesla by the financial gurus is part of the problem these days. all that money could have gone to Tesla to help them get a GREAT product to market.
Instead, the money went to connected interests and insiders who got in early so they could make a 40% profit in one day.
These financial entities underprice this stuff on purpose. irritating. The financial sector is a burden to the rest of the economy. even when it “helps” bring money to a company it sucks ungodly amounts of capital off the top.
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as for the market: we’ve been caught in a trading range for some time now. Up and down and up and down. (with a downward bias the last 2 months or so but still a trading range). Not sure it necessarily “means” anything, although I’m sure my technical analysis friends would beg to differ.
obviously, underlying fundamental data points to negative pressure on the equities markets… but they are heavily influenced/manipulated these days just like the RE market. on a day to day basis we’ve seen lots of +3% and -3% days… it’s a nature of what’s become of stocks. computers trading with computers, HFT and algorithm trading, insider trading and front running.
I wouldn’t be surprised to see the S&P fall down to 666 again or to see it stay in the trading range
[Editor’s Note: Tesla was priced at $17 and traded as low as $17.54 on the open market after opening. The stock didn’t cross back above $18 until just before noon.]

Second both ex SF-er’s outrage and hangemhi’s advice.
I don’t have the stomach for this market. And I need to preserve my housing down payment! Bonds have had a great rally (through dumb luck I moved much of my equity holdings into bonds and TIPS early in the year), and cash is holding its value quite nicely. Unfortunately, it’s hard to see bonds climb much from here. The stock market is just a casino these days. And gold is always just a casino. I’m socking money into short-term bond funds and CDs until we get through the end of the year, at least.

IMO stocks are no place for the little investor to be. It’s like going to Reno and gambling.
With the programmed trading and “dark trades” the average person is in deep, deep water and really it’s not much more than a crap shoot.
If one wants to play stocks do it through ETFs or mutual funds to at least avoid the much larger risk of buying individual stocks.
I have done better with real estate investing over the past decade than I’ve done with my mutual funds. Even with the RE crash.
The investment homes I purchased in Rocklin in 1999 for 100K each went up to 350K at the peak and are now down to 195K (based on a just completed appraisal) so I’m still ahead not to mention a very nice positive monthly cash flow.
Everyone’ different and due diligence is rule number one but, all things considered, I think the little guy has a better chance of making money in RE than in stocks.

AAPL was also a shot in the dark in the late 90s. Then the iPod came out and it was all “yeah, but the Rio, etc is cheaper”. Then the new iPhone came out, and it was all “who will spend that kind of money on a phone”. Sure there was a lot of hype. But these products are incredibly well designed and inspired.
Tesla has blown everyone away with their first line. Speed, range, lines. The issue is that it’s easier to crank out no-moving-parts electronics made primarily in China than a brand new automobile designed and built in our own backyard.
I hope Tesla will deliver on all front.

[Editor’s Note: Tesla was priced at $17 and traded as low as $17.54 on the open market after opening. The stock didn’t cross back above $18 until just before noon.]
do you mean noon EST or CST?
as far as I can tell, Tesla didn’t even start trading until 1130 EST. it then briefly fell and was back up to around opening price within 1-2 hours with the opening grind upwards starting 2 EST.
I still maintain Tesla was underpriced.
it didn’t cross back above $18 until just before noon because a lot of the first people to get the stock sold it immediately on the open. others waited for later in the day.
The IB that brought Tesla to market knew there was fierce demand for it. They expanded the initial offering by several million shares the last few days if I recall correctly. the reason: because they realized they underpriced it. not only that, there may be 2M more shares out there due to overallotment.
some regular investors may have gotten in around $17, but that doesn’t mean that’s where the insiders got it. they may have gotten it even lower.
of note, they did the same thing with A123, who initially was set to go at $9 a share, raised to $11.50 days before IPO, and then $13 when it actually did it’s IPO. It rose to over $20 on the first day of trading. why? it was underpriced.
on a side note: it is not uncommon to see major spikes on IPO day followed by sluggish returns after that. I am NOT saying this will/will not happen with Tesla. It has nothing to do with the quality of the companies. it is just a common trend one sees.
this is why initial pricing is so important, because many companies won’t see these levels again for a while. (for example A123 opened $13 in September, rose to near $21 on first day, and is now trading around $9)
I only bring up A123 because they are the same industry (electric) and because they’ve both IPO’d recently. They otherwise have nothing in common except for underpriced IPOs.

Properly pricing an IPO is an art. My last company did an IPO in ’04. They repriced it, adding more shares and doing a split to keep the same attractive IPO price. The pricing was too high ultimately, but it took 2 years to realize that… Good thing I had sold and moved on to greener pastures long before that.

TSLA traded over 10 million shares yesterday below $19. Any retail investor that wanted to had many chances to get involved if they were paying attention. Also, I’m not sure how you, me, or any banker on the deal could have said $2.6 billion for a company that might do $100 million in revenues this year is underpriced. It’s a hype story, they just as easily could have priced this at $24 and see the stock at 15 today.
Secondarily, how can you argue that AONE was underpriced at 13.50 when it now trades at 9.50?

Hype? sure.
Pricey, why not?
Model S will be the moment of truth for electric cars. 300 miles range is right on the sweet spot. Enough for a leasure day trip to santa Barbara thrugh the PCH. You can go to Monterrey with the upcoming Nissan Leaf but not much further… Then there’s the Volt and you’re out of juice in san Jose!

Secondarily, how can you argue that AONE was underpriced at 13.50 when it now trades at 9.50?
simple. the key is this phrase:it is not uncommon to see major spikes on IPO day followed by sluggish returns after that. I am NOT saying this will/will not happen with Tesla. It has nothing to do with the quality of the companies. it is just a common trend one sees. this is why initial pricing is so important, because many companies won’t see these levels again for a while.
I’m sure retail investors could have gotten in somewhere around $17.50 or so… but the insiders may have gotten in way below that.
Pricing an IPO can be difficult, but it’s not THAT difficult. Besides, Tesla is paying their IB hordes of money to do this. If the IB can’t even get within 50% of the price target what are they getting paid for?
Last I checked TSLA was up 40% yesterday and another 20% today.
are you arguing that TSLA was appropriately priced??? how on Earth can you argue that? They could have changed the price anytime up until about 26 hours ago!
it’s like 477 Day (on the last thread) that is obviously being underpriced in order to garner a bidding war. But there is a difference between IPO and RE in this case.
with 477 Day, the owners get all the cash (minus transaction fees) whatever the final price ends up being.
TSLA doesn’t. it gets the money from the IPO offering, and all the rest of the runup accrues to the stock holders, which are clearly regular people and employees (a good thing)… but it is also to those connected to the bank (a bad thing).
the runup still helps TSLA as it can bring another stock offering… however the time to hit it big was with their IPO. and it was OBVIOUS that it was going to do well… this is why they started adding shares offered and also raised the offer price… but clearly not enough.

Then there’s the Volt and you’re out of juice in san Jose!
lol, I hope you weren’t basing your investment on that information. The Volt is a plug in series hybrid vehicle, and a small four cylinder engine will kick on once the batteries are discharged.
ex SF-er, There is a quote attributed to legendary VC Don Valentine: something about investment bankers not having ears. As in price my offering higher (I can’t hear you, I have ‘clients’ to take care of…). I still don’t understand why more companies don’t use WR Hambrecht with their dutch auction; perhaps it says something about the ‘hype machine’ and backroom deals tied to our country’s financial apparatus.

EBGuy, I know about the Volt. Including it into the list was too tempting.
The 3 samples (Tesla/Leaf/Volt) shows 3 types of ambitions. The Tesla goes towards mainstream use. Leaf goes after urban transportation. Volt just wants to go a notch over the Hybrid model.
My bet is people won’t change their lifestyles. even though most cars are used for sub-60 miles trips, people won’t buy anything that cannot be used on WEs or longer trips. Ultimately we need a pure replacement of the family car. Tesla has that ambition.
300 miles and a 45-minute charge is what most people need. for WE trips, you drive for 4 hours, do a pit stop, have lunch, come back to your car with a mostly full charge and go on with your trip. Excellent range/charge time compromise.

I know about the Volt. Including it into the list was too tempting.
Okay, but if you really wanted to mock, you could have included a plugin Prius that might make it to SFO (if you’re lucky). From what I can gather, though, the plug in version will have a $1k premium ($4k – ~$3k incentive) over the regular Prius — methinks that is a pretty good price point.

I still don’t understand why more companies don’t use WR Hambrecht with their dutch auction; perhaps it says something about the ‘hype machine’ and backroom deals tied to our country’s financial apparatus.

When the boutique firm WR Hambrecht + Co persuaded Google to use an auction process for its 2004 IPO, there was a lot of talk about the end of traditional investment banking. Five years later, however, firms like Goldman Sachs are as dominant as ever, and auctions are rare. Google could rely on its own brand to sell the stock and create a deep secondary market in which its employees could exercise their stock options. But most companies need a little more help. Although Goldman Sachs may not be a bargain, if you’re undertaking a one-shot deal, you may want to pay more to hear the one thing a hungry upstart can’t tell you: that the company knows how to handle an offering of size and complexity, because it’s done so a bunch of times before.

I don’t agree with about 75% of the rest of that article, but that paragraph was convincing for me. The people who were already on the inside wanted as many assurances of a hit as possible; I don’t think they thought they were the next Google when they planned the IPO.
And ex SF-er, of course it was underpriced. That’s the vampire squid’s MO.

D’oh! Back under 10,000.
On the plus side, the nice bond rally continues as interest rates plummet.
[Editor’s Note: No word on why hangemhi didn’t weigh-in with the update, but down 5% since August 2.]

wow, i’m now famous. the Editor loves me.
i was about to write on the mortgage delinquency post “what’s taking the editor so long to write a about the Dow”.
Cramer said we’ve seen the lows for the year… so you know we’re going lower. have you dumped Tesla yet? $20 seems like a great price to do it at.

i was about to write on the mortgage delinquency post “what’s taking the editor so long to write a about the Dow”.

Why create another post when everyone can just come back to this one and comment 🙂 It’s been working so far…and who knows, the S&P 500 Index might drop a full percent or two tomorrow and make today look like nothing special happened.
Seems to me that Tesla is a buy-and-hold stock, like Apple was when it was trading at $12 per share during 1999-2000. Going to be a while before they post profits on a regular basis, but if you bought at the IPO, you’ll be able to tell your children you invested; you didn’t just go gambling in Casino de Wall Street. Not saying it’s going to match Apple’s performance, though.